Conversational Commerce and What It Means for Your Customer Strategy

Conversational Commerce refers to using natural language within a messenger application (Messenger, WhatsApp, WeChat, and others) or using voice assistants (Siri, Amazon Alexa, and others) to interact with a business for an inquiry, purchase, or customer service.

The term Conversational Commerce was coined by Chris Messina, Developer Experience Lead at Uber, in a brief post over a year ago. Earlier this year, Chris called 2016 the year of conversational commerce, and more recently, Mary Meeker in the Internet Trends Report 2016 declared:

“…Messaging = Evolving from Simple Social Conversations to Business-Related Conversations”

While Conversational Commerce has been around for a while (think IVR and SMS) the recent success is the culmination of three key factors – emergence of the mobile-first customer, domination of messaging apps, and the increasing maturity of Artificial Intelligence.

Emergence of Mobile-First Customers

In the IAB Nielsen’s Mobile Ratings Report 2015 , findings indicate that Australians live in a mobile-first world:

Australians over 18 spend more time on smartphones than any other digital device, with just over 33 hours per person per month spent browsing or using apps

9 million Australians used commerce or shopping sites on their smartphone

75% of Australian smartphone users connect to financial services every month

Time spent browsing or on applications is now higher on smartphones than desktop or any other device with 42% of time spent browsing or using applications

While the total time spent on commercial activities is at an average of 3%, this trend is poised for rapid growth as organisations mature their Conversational Commerce capabilities.

Domination of Messaging Apps

Messaging apps like WhatsApp and WeChat are no longer just for conversation between friends and family. Increasingly, they are evolving into ecosystems where users connect with brands, browse merchandise, and watch content. Asian companies such as WeChat and LINE have led the market in monetisation of these services, and the Western markets are not far behind — with Facebook’s standalone messaging app Messenger surpassing 1 billion users as of the writing of this article. There was another milestone reached in 2015 when monthly active users of the top four messaging apps surpassed the top four social networks as highlighted by the BI Messaging App Report .

While advertisers have flooded the mobile market, investment is largely focused on social networks like Facebook and Twitter rather than messaging services like WhatsApp and Messenger. The landscape will certainly shift as businesses explore messaging apps as a viable avenue for connecting consumers with their brands in a more targeted and engaging manner. Leading the charge is Facebook, announcing its intentions for its Messenger platform at its annual F8 conference last year:

“Messenger … will connect businesses to their customers too. Today we previewed Businesses on Messenger, which will enable companies to use Messenger to send messages, like order confirmations, shipping statuses and delivery notices to customers who choose to participate. Customers can also use Messenger to reach out to businesses with questions and receive quick responses …”

Maturity of Artificial Intelligence

The AI landscape is maturing rapidly and 2015 was a landmark year for realising the potential of commercialisation of AI. Even though IBM’s Watson defeated Jeopardy champions in 2011, AI lagged behind basic human perception and cognitive abilities. Recent developments in the areas of image recognition (visual perception), language recognition (auditory perception), facial recognition (emotional perception), and deep learning have opened new doors for human computer interactions.

So what does all this mean for customer strategy?

Considerations for Customer Strategy

Early adopter failures of simplistic chat bots and virtual assistants with limited functionality do not reflect the true potential of this emerging channel. A lot of existing messaging apps, such as Tay from Microsoft and the weather bot from Kick, have been ineffective. Built on archaic technology or designed poorly (or both), they do not reflect the potential that today’s technology can offer, and must not deter businesses from embracing this new channel that has already demonstrated its commercial value in Asian markets.

Chief Customer Officers cannot ignore the commercialisation of this channel, particularly as the Millennials emerge as the dominant consumer group. Key to success will be a balancing act that must resist the temptation ‘to be cool’ at the expense of effectiveness. Businesses must adopt a customer-first approach as they build out these applications. Other considerations include:

Simple vs. Complex — Start Simple

The appeal of the chatbots is the simplicity of the interface and key to success is to keep interactions simple and redirect to other digital channels for complex interactions. Keep in mind that the field of AI is maturing rapidly and investment into solutions must have a longer-term view rather than on short-term gains. As adoption of the channel increases, functionality can be extended into complex interactions. Complex interactions will only succeed if the bot has learning capability and is able to evolve with each transaction.

Convergence vs. Proliferation — Proliferate Before Converging

Seduced by visions of the possible, strategists are dreaming of a future where all business interactions will be enabled through messaging interfaces. Although the convergence of channels into messaging apps is possible, it is recommended that businesses think of it as an additional channel for the time being. Simple tasks that can be automated such as payments, ‘how to’ questions, etc. can be transitioned into these apps easily, however, existing channels must still be made available for customers until there is a significant shift in channel preferences.

Bots Alone vs. Bots with Humans — Start with Bots with Humans

While simple interactions can be easily automated, for complex interactions, at their current level of maturity, it is likely that bots will need human assistance. We have all been lost in endless loops of IVRs, manically pressing ‘0’ or yelling ‘Agent’ into the phone. To not repeat history, it is advised to adopt a ‘Bots with Humans’ approach to the messaging channel. This will not only help drive adoption, but make the interactions richer and more engaging for customers, resulting in a memorable experience. As natural language processing improves and bots become more sophisticated, complex transactions can be further automated with human intervention required only under exceptional circumstances.

Chat in Apps vs. Apps in Chat — Depends On Situation

Companies can offer messaging capability embedded within their mobile app or offer similar functionality via messenger applications. The strategic approach will depend on the company and the nature of transactions supported. Organizations Organisations handling sensitive data and information, such as financial institutions and B2B organisations (with a highly-targeted audience) are more likely to consider offering Chat in Apps unlike traditional B2C businesses transacting at a high volume and low dollar value transactions. Financial institutions are also more likely to already have apps with high adoption and usage levels. Businesses offering services to ‘high net-worth’ individuals are also likely to adopt Chat in Apps model to preserve privacy and security of their customers.

Context vs. Personalisation — Both

The greatest customer benefit of conversational commerce is the emphasis on personalised service. As customers engage with a company through a direct channel for a knowledge, sales or service request asynchronously, chat bots with human agents have the ability to leverage customer information, customer history, and customer context to offer a highly relevant and personalised customer experience. Context can also be transferred to all subsequent transactions with the customer, if relevant.

Some Companies That Do It Well

KLM Using Messenger
KLM are a great example of using these platforms to offer a consistent and simple customer experience through Facebook Messenger. Passengers are given the option to receive flight updates through Messenger in a chat thread that includes booking confirmation, flight status, boarding pass and any scheduling changes. Digital boarding passes are not new, but use of a conversational interface is. It is a way for KLM to stay in touch with customers in an environment they are familiar with.

Radisson Blu’s Virtual ‘Host’ with Text and Voice Messaging
Another example of Conversational Commerce in action is Edward, Radisson Blu’s Virtual Host. Edward works by using automated and intelligent text-based interaction via a self-service interface that is accessible 24/7. Guests can use the service to message their requests and get immediate responses. The natural language understanding interface enables guests to use natural, conversational language rather than remembering specific commands. The application is backed up with live assistance, so complaints or requests that need a follow-up by hotel staff can be immediately addressed. Guests can also ask for a callback if needed, with the context of the interaction passed on to a staff member. Radisson Blu are also trialling the technology with voice commands using Amazon Echo.

Operator through Messaging Apps with Humans
Operator is a ‘request network’ aiming to “unlock the 90% of commerce that’s not on the Internet”. The Operator app connects users with a network of “operators” who act like concierges and can execute any shopping-related request. Customers can order concert tickets, get gift ideas, or even get interior design recommendations for new furniture. Operator is positioned for bigger ticket purchases requiring more research and expertise where its operators can add significant value to a transaction. Operator’s agents are a mix of Operator employees, in-store reps, and brand reps. The company is also developing artificial intelligence to help route requests.

WeChat in China
WeChat is a popular messaging app in China with 700 million monthly active users, combining a chat-based interface with a vast library of add-on features such as a mobile wallet, chat transactions, and chat-based media and interactive widgets. WeChat enables businesses — from mom and pop noodle shops to powerhouses such as Nike and Burberry — to “friend” their customers and market to them directly through a powerful API. On WeChat, users can conduct a myriad of activities — including hailing a taxi, ordering food delivery, customising and order a pair of Nikes, booking doctor appointments, hosting a business conference call, and paying the water bill. Over 10 million businesses in China have WeChat accounts, and it is becoming increasingly popular for small businesses to forgo a website or mobile app to only have a WeChat account.

Conclusion

Conversational Commerce is the emerging approach to leveraging the already popular messaging interfaces and channels for even greater customer satisfaction. Conversational Commerce enables companies to deliver highly-relevant, personalised customer experiences in an effortless manner through a natural language interface. The ability for brands to meet customers where they are already spending most of their time – online – makes this a strategic imperative for interactions across the customer lifecycle. Chief Customer Officers must define a conversational commerce strategy as they position their brands for future success.

I specialize in defining next generation customer management strategies across the customer lifecycle. I am passionate about leading sustainable business transformation through improved customer centricity, employee engagement, and operational excellence. As a committed learner I am at my best when surrounded by ideas and intelligent people. I offer over 12 years of management consulting experience with top-tier consulting firms in the US working for Fortune 500 clients, and executive leadership experience in Australia.

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